Alexion moving to Boston but keeping 450 workers in New Haven
NEW HAVEN >> Alexion Pharmaceuticals will relocate its world headquarters from New Haven to Boston starting later this year and take about 400 jobs with it, company executives said Tuesday in a conference call with financial analysts.
The relocation of the headquarters is part of a larger restructuring that includes layoff of 20 percent of the company’s worldwide workforce, Ludwig Hantzon, the company’s chief executive officer, said during the call. Alexion also will close a Rhode Island manufacturing facility where it makes one of its rare disease drugs, Soliris.
The restructuring will leave Alexion’s College Street offices in New Haven with 450 workers, primarily in research and development, as well as variety of other positions, including compliance workers and case management nurses.
Hantzon said the restructuring is necessary to position the company for future growth, to refocus spending and promote growth in shareholder value going forward. Alexion will take a one-time charge against earnings related to restructuring that is expected to be in the range of $340 million to $440 million, according to Hantzon.
“By streamlining our operations, we will create a leaner organization with greater financial flexibility that is highly focused on delivering for patients, growing our rare disease business, and both leveraging our leadership in complement and pursuing disciplined business development to expand the pipeline,” he said.
Company executives added that the company is expanding its search for drug candidates from serving just “very rare diseases” to include rare diseases that have larger patient populations.
Alexion began a strategic review of all of its operations shortly after Hantzon became CEO in March. Catherine Smith, commissioner of the state Department of Economic and Community Development, said company officials informed her a few days ago that they were considering relocating.
“We tried to convince them to stay,” Smith said, adding that her pitch to keep Alexion’s headquarters in Connecticut didn’t include an offer of additional financial incentives.
“We’ve already been very generous with them already, so it didn’t seem appropriate to offer them anymore. I believe they will regret making this decision,” Smith said.
Smith said the state’s deal with the company in 2016, when it relocated to its current headquarters from one in Cheshire, calls for Alexion to pay back $20 million in loans from the state, $6 million in grant money and $2.1 million in penalties and interest.
“They also will not be eligible to use any tax credits (from the state) that they had not already applied for in advance of today’s announcement,” she said.
State Senate President Martin Looney, D-New Haven, was more pointed in his criticism of the company, saying in a statement that the company has been plagued by bad news and poor business decision since last year.
“It’s unfortunate that federal investigations and poor financial investments are forcing Alexion to lay off thousands of workers worldwide and shutter some of its facilities, including in Rhode Island next door,” Looney said. “Certainly Connecticut has been a very strong business partner with Alexion, investing millions of dollars and a great deal of time and resources in growing the company right here in Connecticut. But there are some business decisions which are out of the control of state government.”
Looney’s comments reference a pair of lawsuits filed against the company in the past year, accusing Alexion officials of violating federal securities laws.
The stretch of bad news continued in December when then-Chief Executive Officer David Hallal and Vikas Sinha, its chief financial officer, left the company. That was followed by a double dose of bad news in May.
Alexion’s chief financial officer, the head of research and development, the top compliance officer and the executive in charge of human resources all announced the same day that they would leave the company.
The next day, a Bloomberg Businessweek story was released that painted an unflattering picture of the company.
The Businessweek story elaborated on allegations of aggressive sales practices by the company as well as the cost of its star drug Soliris, which costs more than $18,000 for a single treatment. Among the companies problems cited in the Businessweek were a May raid of Alexion’s offices in São Paulo, Brazil, as part of an investigation into the company’s business practices there, as well as an investigation the U.S. Securities and Exchange Commission has undertaken over the past two years into grants made by Alexion in Brazil, Colombia, Japan, Russia and Turkey to rare disease patient groups, allegedly in an effort to attract new users of Soliris.
Alexion’s relocation to Boston is expected to get to begin later this year and continue through mid 2018.
City officials confirmed the impending move late Monday. Lawrence Grotheer, a spokesman for Harp, released a statement on the mayor’s behalf, but said she would not deviate from her schedule Tuesday.
Harp’s schedule Tuesday was devoted to last-minute campaign for Tuesday’s Democratic primary contest in the city against challenger Marcus Paca. Harp is seeking a third term as mayor and some in her administration had sought to delay Alexion’s announcement until after the vote.
“Alexion’s decision to move .. to Boston - with access to (a) full-service airport and other essentials for an international corporation full-service airport and other essentials for an international corporation - seems intended to suit its new, Boston-based CEO and a worldwide sales force,” Harp’s statement said in part. “New Haven will remain a bustling hub of bioscience and other medical research. For example, the new College Street building is perfectly situated near the hospital and the Yale School of Medicine - we expect new tenants there to contribute in this growing sector of the national economy,”
Hantzon said the decision to relocate the headquarters of the company was difficult, given “the legacy we’ve had in New Haven.” Alexion was founded by Leonard Bell in New Haven in early 1992. Bell left the company in May 2017. Alexion is moving into Boston’s Seaport District near South Station, the same neighborhood adjacent to the city’s waterfront that now houses General Electric’s headquarters. General Electric moved from Connecticut to the Seaport District last year.
New Haven officials sought to reassure the business community that Alexion’s headquarters relocation will not derail the city’s economic development efforts.
“While the restructuring will create difficulties, we take great pride in the work Alexion has done and will continue to do in New Haven as they move forward with research and development at 100 College Street,” the city’s economic development team, led by Economic Development Administrator Matthew Nemerson,said in a statement sent to the business community. “Our first priority is to assist the scientists and world-class researchers who will be laid off. Many of them recently joined the company and signed on to Alexion’s mission and support of patients with rare and often devastating diseases.”
Although New Haven has seen an ebb and flow of biotechnology companies, the statement reaffirmed the city’s focus on companies in that sector.
“With Yale University and Yale New Haven Hospital as major anchors, New Haven institutions are in receipt of $421 million in NIH (National Institute of Health) research grants,” the statement said in part. “This is the 14th highest total in the nation and a further indication that the talent and quality of science in New Haven remains at the center of our economic strategy. The pipeline of talent in New Haven includes over 30 biotech companies, all working on cutting-edge research, and a major part of the city’s employment growth in recent years.”
Total employment in the city reached 81,900 in 2016, with over 5,000 jobs gained in New Haven since 2010, according to city officials.
The city’s agreement when the 100 College Street development was built included a minimum requirement of 225,000 square feet for a medical/lab office building, city officials said. The development grew to 495,000 square feet after Alexion was secured as a tenant. Grotheer said Alexion is the sole tenant of the building, which is managed by Concord, Massachusetts-based Winstanley Enterprises. Officials with Winstanley Enterprises were unavailable for comment on Alexion’s decision.
The statement from Nemerson and other EDC officials said 100 College Street “is designed to support New Haven’s strong pipeline and demand for R&D space in a cost-competitive location relative to Boston and New York.”
“Of course, we understand the challenge ahead of us and are fully prepared to meet that challenge through support for exceptional research, through infrastructure investments and through connections back into our neighborhoods with robust workforce pipelines,” the statement said.
An economist and business expert said that while Alexion’s decision is a setback for New Haven, it is unlikely have a long-term negative impact on the city’s economy.
“Between the educational community and the healthcare sector, (New Haven) is more diversified than other parts of the state,” said Donald Klepper-Smith, chief economist and director of research for New Haven-based DataCore Partners. “It’s certainly a psychological blow to New Haven, but not one that can’t be overcome.”
Klepper-Smith said New Haven is far better shape to handle Alexion’s headquarters relocation than when drugmaker Pfizer pulled out of New London. In an analysis released in February 2011, Klepper-Smith said the 1,100 jobs Pfizer announced in 2009 it was moving out of New London, would also put other jobs in southeastern Connecticut’s overall economy at risk because of spending by the company and its employees.
A similar impact is likely with the relocation of Alexion’s headquarters and the jobs that go with it, he said.
“Pharmaceutical and bio-tech jobs have some of the biggest multipliers that I’ve ever seen,” Klepper-Smith said.
But he cautioned that the value of the research and development operations that Alexion is keeping in New Haven may not be as important as city officials are making it out to be.
“Not all R&D jobs are created equally,” Klepper-Smith said.
David Cadden, a professor emeritus at Quinnipiac University’s School of Business, said New Haven and state officials need to reassess their focus on the pharmaceutical and biotech industries.
“Apparently, having Yale here and having UConn here is not enough in terms of talented personnel that these companies need,” Cadden said. “Perhaps more of niche focus should be taken. AI (artificial intelligence) is getting a lot of buzz and Yale has a program in that area, but I don’t know going enough to build a growth sector on.”
Alexion will move into the Boston office at 121 Seaport in June, according to officials with Swedish commercial construction giant Skanska, the company that is building the office and mixed-use complex. The neighborhood, once a heavily industrial section of the South Boston neighborhood, has been transformed in recent years to a predominantly white collar area that attracts young professionals.
Alexion will occupy 150,000 square feet, of the 400,00-square-foot, 17-story building, taking up the third through eighth floors.
“121 Seaport now being 100 percent leased demonstrates the Seaport’s arrival as one of Boston’s most sought-after ... business destinations,” said Charley Leatherbee, head of Skanska’s Commercial Development operations in Boston.
Alexion’s new headquarters will include amenities such as:
• Elevated 10-foot ceilings.
• Panoramic waterfront views of the Boston Harbor and the city’s skyline.
• Outdoor terraces.
• Access to a private, tenant-only fitness center.
• An around the clock hotel-style concierge service.
• Access to high-end retailers that will be in the first two floors of the building.
The 121 Seaport building will be ready for tenants to move in starting in early 2018, according to Skanska officials.